China-US trade tensions increase

WASHINGTON AND Beijing ratcheted up trade tensions yesterday as the US launched a case with the World Trade Organisation over car parts, and Beijing responded by filing a complaint over a new US tariff law.

China filed a case with the WTO yesterday challenging US anti-dumping measures on billions of euro worth of products, including kitchen appliances, tyres, paper and other goods.

News of Beijing’s action came shortly after US trade representative Ron Kirk filed a complaint with the WTO over allegedly improper Chinese government subsidies for exports of cars and car components.

“Export subsidies are prohibited under WTO rules because they are unfair and severely distort international trade,” Mr Kirk said. “China expressly agreed to eliminate all export subsidies when it joined the WTO in 2001.”

Both cases translate into worsening trade relations as global demand continues to weaken.

China’s car industry has expanded swiftly in the past decade and is now the largest market for car purchases in the world. General Motors sells more cars in China than in the US. However, the US believes too much growth comes from subsidies, saying up to 60 per cent of China’s car components exporters benefit from subsidies, making it difficult for US companies to compete.

Scott Paul, executive director of the Alliance for American Manufacturing, described the action taken by the Obama administration as a “major boost” for the car industry in “holding China accountable for its cheating”.

The alliance maintains that more than 400,000 US car-parts jobs have been lost since 2000 because of predatory Chinese trade practices, and that a further 1.6 million jobs are at risk.

“There have been a number of contributing factors to the decline in auto employment in the US in recent years, but, in auto parts in particular, there’s been no bigger factor than the surge in Chinese imports, particularly over the past three or four years,” said Mr Paul.

“We’ve seen 25 per cent increases in auto-parts imports from China last year and [in 2010]. At that rate, the Chinese would have about half the American auto-parts market by 2020.”

Speaking to The Irish Times, Mr Paul rejected the notion that Chinese car-parts manufacturers could simply make the same parts more cheaply and efficiently, insisting that subsidies constituted China’s only competitive advantage. “In most of these types of manufacturing, labour counts for less than 10 per cent of the total cost of the product,” he said.

The US complaint came as US president Barack Obama was campaigning in Ohio, which is home to many car workers and a key state in the presidential election battle between Mr Obama and Republican rival Mitt Romney.

The €267 billion US car and component industry employs 800,000 workers. Both the Democrats and the Republicans have been accusing each other of not doing enough to protect US jobs from competition from China.

China’s ministry of commerce said its latest WTO complaint was focused on the US Congress’s passage of a law this year that retroactively gave the US commerce department power to impose anti-dumping duties on Chinese goods.

That came after a US court reversed earlier duties imposed under rules covering countries such as China and Vietnam that are deemed “non-market economies”.

“This practice puts Chinese enterprises in an uncertain legal environment, in violation of the relevant rules of the WTO transparency and due process,” ministry spokesman Shen Danyang said.